Two-thirds of Indians now rely on private hospitals and the cost of hospitalisation has risen by 200% in 10 years.

Health Minister JP Nadda has asked Fortis Memorial Research Institute in Gurugram for a detailed report into the death of seven-year-old Adya Singh after her family alleged medical negligence and that the hospital had overcharged them. The child had been taken to the hospital with a severe case of dengue and had been treated for two weeks but died. The family spent almost Rs 16 lakh at the hospital during this time.

The girl’s father Jayant Singh told reporters that the family spent close to Rs 4 lakh on medicines, Rs 2.85 lakh on medical and surgical procedures, Rs 2.17 lakh on medical investigations including blood tests, Rs 29, 290 on other diagnostics and Rs 2.73 lakh on medical consumables including up to 2,700 gloves. They were billed for admission charges, room rent, doctor’s fees and equipment charges.

The family had medical insurance cover of only up to Rs 3 lakh and had to pay everything else out of pocket.

While enquiries may reveal whether Fortis hospital overcharged the Singh family, their tragic case also highlights the soaring costs of healthcare in India.

It has been said time and again that India’s investment in public health has been abysmally low. The government spends only 1.4% of gross domestic product on health. Even its target of bringing health expenditure up to 2.5% of GDP is far less than what most other countries spend on the health of their people. This feeble government spending has created a vacuum which is now filled by private health sector, which has grown in leaps and bounds, spending more than double of what the government does at 3.3% of GDP. This brings India’s total investment in health to 4.7% of GDP, still far short of the world average investment of 10% of GDP.

Low public health investment has resulted in high out-of-pocket expenditure for people availing of health services. Data from the National Sample Survey Office shows that not only are more Indians being hospitalised in recent years, almost two-thirds of all Indians seeking medical treatment go to private hospitals. The NSSO’s report on health in India based on a survey conducted between January and June 2014 shows that 79 people for every 1,000 were hospitalised. This is up from 54 people in 2014 and 33 people in 1995-’96.

As much as 68% of all hospitalisation cases in urban areas and 58% in rural areas now are at private hospitals.

This over-reliance on private hospitals allows hospitals to charge substantially more than government facilities. As public health activists often point out, healthcare is not like any other consumable where the consumer can hold out for better prices. When faced with the prospect of a sick or dying relative, a person will choose to expensive tests and procedures. Patients and families who are given choices between less and more expensive drugs, tests or procedures will choose the more expensive one, equating the higher price with better guarantee even though the more expensive drug, test or procedure may not be scientifically proven to be better.

According to the NSSO’s 2014 survey, the average cost of medical treatment for hospitalisation was Rs 18,268. This does not include non-medical costs incurred during hospitalisation. There were also large variations in the amounts spent at public and private hospitals.

The cost of hospitalisation in both rural and urban areas have risen by almost 200% between 2004 and 2014.

The NSSO’s analysis of non-hospitalised treatment procedures shows that costs at private hospitals are about twice as much as those in public hospitals, and generally higher in urban areas compared to rural areas. Most of this expenditure is on medicines.

Most of all this expenditure of out-of-pocket for people seeking treatment. Out-of-pocket expenditure is still more than 60% of all health expenditure, highlighting the failure of public investment in healthcare. Meanwhile more than 80% people across India do not have any kind of government or private health insurance to cover regular and emergency medical spending.

An analysis by Scroll.in in August this year shows that the healthcare is making money for private players as the government fails to step up investment. There has been massive private investment in large hospitals and chains of diagnostic centres, but with a sharp focus on profitability. Foreign direct investment has risen sharply since 2014.

All this investment and the dominance of the private sector in India’s healthcare has brought enormous earnings to the top healthcare companies. According to rating agency ICRA’s analysis of five big hospital chains – Apollo, Fortis, Narayana Hrudayalaya, Max India Limited and Healthcare Global Enterprises Limited– revenues of these entities alone touched Rs 12,990 crore in the year ended March 2017. This is an increase of about 80% over the course of a five-year period starting March 2012. Meanwhile, their profits grew by Rs 770 crore during the same period to touch Rs 1,890 crore by this March. This is an increase of 68.75%.